EMEA Weekly: # 12‏

The Polish economy has been slowing and next week's macroeconomic numbers are likely to confirm this. Wage data for February will be released on Monday and we expect average gross wages to have increased by 3.0% y/y. More concerning are the industrial production numbers due for release on Tuesday, which are likely to show that production decreased by around 1% y/y.

So, even though NBP signalled that last week's cut was the end of the cutting cycle, next week's numbers could be a reminder that it should not stay on hold. If Polish macro data continue to be poor, the market may soon start to price in further cuts from NBP despite the hawkish rhetoric, as the central bank's communication has shown to be somewhat misleading sometimes.

Hungarian Policymakers Scare Investors: Forint Collapses
The Hungarian forint took a beating this week, in particular following major sell-offs on Monday and Tuesday. This comes on the back of some very unfortunate comments from Hungarian Prime Minister Viktor Orban and the new central bank governor, György Matolcsy.

Orban is, among other things, talking about scaling back foreign bank ownership - in effect threatening to nationalise part of the Hungarian banking sector.

Furthermore, we are somewhat concerned that the new central bank governor, György Matolcsy, has effectively fired his two deputy governors, Ferenc Karvalitis and Julia Kiraly - or at least taken away their responsibilities. These responsibilities - monetary strategy and financial stability - have been transferred to Matolcsy's own appointment, Adam Balog.

Russia: Elvira Nabiullina To Head Russian Central Bank
President Putin has nominated Elvira Nabiullina, his aide and former economy minister, as next governor of Russia's central bank (CBR). The nomination is expected to be approved by parliament and Nabiullina will take up the position in late June.

The nomination was somewhat surprising as Putin had promised last week. Despite the fact that Elvira Nabiullina is professionally qualified for the task, we are slightly concerned that the CBR might take a step towards being less independent than under the former governor Sergei Ignatiev. However, the current path of the CBR towards inflation targeting and a flexible exchange rate is likely to continue, as the policy is widely supported by politicians as well.

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